Tuesday, July 31, 2007

Keeping Posted at Month's End

* Emotions Are Universal - This is an excellent article about the fear that has gripped the credit markets, particularly in the debt instruments of the investment banks. What is important to note, however, is that the small, retail trader is not trading these instruments! It's the investment banks themselves that make markets in the derivatives that are being shunned. Professional traders have access to greater information flows and financial resources than the average trader, but they seem no less affected by fear and greed. It seems almost quaint that, just a year or two ago, I was hired by two investment banks to help their traders. The problem? The firms wanted them to "take more risk". Like I said: fear and greed.

* Tightening Emerging Markets - First China, now it's India raising the reserve limits of banks in an effort to curb inflation. With India, unlike China, there's also a rising currency to contend with, which will cut into export earnings. (Although traders are also betting on an more expensive Yuan). Can these economies achieve soft landings? The history of runaway markets such as China's doesn't leave much room for optimism. While we've seen risk aversion in the credit arena, that hasn't been the case in emerging market equities: Shanghai's "A" index is at an all-time high and India's Sensex 30 is not far off its peak. At some point, tightening monetary authorities and exuberant stock markets are going to butt heads. Not yet.

* The Primed Mind - This excellent NY Times article outlines research on how our brains respond to subtle stimuli, all beneath the level of our consciousness. How many impulsive trading decisions are made simply because we are primed to act by events that have little to do with markets or trading edges? One advantage to having clear trading plans and rules is that they provide a focus for action apart from extraneous priming..

About Me

Author of The Psychology of Trading (Wiley, 2003), Enhancing Trader Performance (Wiley, 2006), The Daily Trading Coach (Wiley, 2009), and Trading Psychology 2.0 (Wiley, 2015) with an interest in using historical patterns in markets to find a trading edge. As a performance coach for portfolio managers and traders at financial organizations, I am also interested in performance enhancement among traders, drawing upon research from expert performers in various fields. I took a leave from blogging starting May, 2010 due to my role at a global macro hedge fund. Blogging resumed in February, 2014, along with regular posting to Twitter and StockTwits (@steenbab). I teach brief therapy as Clinical Associate Professor at SUNY Upstate in Syracuse, with a particular emphasis of solution-focused "therapies for the mentally well". Co-editor of The Art and Science of Brief Psychotherapies (American Psychiatric Press, 2012). I don't offer coaching for individual traders, but welcome questions and comments at steenbab at aol dot com.